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Business News/ Opinion / The practical impossibility of growth-less jobs
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The practical impossibility of growth-less jobs

It is time we recognised the practical impossibility of having growth-less jobs on a sustained basis

For quality jobs, growth and development, what India needs is accelerated industrial growth. Photo: Priyanka Parashar/MintPremium
For quality jobs, growth and development, what India needs is accelerated industrial growth. Photo: Priyanka Parashar/Mint

The problem of jobless growth in recent times has attracted a lot of attention. But no one talks about the problem of growth-less jobs—creating jobs that do not sustain themselves or lead to growth. It is time we recognised the practical impossibility of having growth-less jobs on a sustained basis.

The Keynesians in us know that Keynes said, “‘To dig holes in the ground,’ paid for out of savings, will increase, not only employment, but the real national dividend of useful goods and services." But we forget that he added, “It is not reasonable, however, that a sensible community should be content to remain dependent on such fortuitous and often wasteful mitigations when once we understand the influences upon which effective demand depends."

There are many things to be done for making up our backwardness relative to China and other East Asian nations. Let us concentrate on three of these, all related to measures that á la Keynes are fortuitous and often wasteful mitigations, and promote growth-less jobs. The way forward to claim our place in the emerging Asian century lies in correcting these three problems, among others. Not jobless growth, not growth-less jobs, but growth with jobs.

First, the seductive appeal of Garibi Hatao here and now. Poverty on such a large scale cannot be removed by doles or subsidies. It can be removed on a sustained basis only by providing better education and health facilities, and better physical infrastructure such as rural roads to improve the poor’s earning capacity. Providing handouts for immediate succour may win votes for some time. But, their fiscal unsustainability inevitably leads to a government out of control. They flop, and, when they do, they fail to fetch votes.

Look at the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) providing 100 days of assured wage-employment in a financial year to a rural household whose adults volunteer to do unskilled manual work. The law stipulates a ratio of wage to material costs of no less than 60:40. With such a ratio, you cannot build a durable road or concrete school building. It is a recipe for ensuring that the village roads and schools built get washed away in the next monsoon—a good example of promoting growth-less jobs.

Garibi Hatao has also been aggravated by an unwillingness to differentiate among various strata within the poor. The debate about targeted versus universal subsidies has centred only on who constitutes the poor rather than among the poor, who can we afford to help. Is a five-member urban household earning say 5,500 a month beyond poverty? For the politician, economics professor, policymaker or journalist, earning several multiples of 5,500 per month, it is difficult to classify such a household as anything but poor.

But, the relevant question to ask is, given our fiscal abilities, who should we focus on among the poor? Accepting the reality of our limited fiscal ability to help all the poor here and now, after 67 years of independence, may hurt our sensibilities. But, by dodging the question, we will not have the wherewithal for bijli, sadak, pani (electricity, roads and water), and education and health for all.

Trying to usher in achhe din (good times) immediately will postpone achhe din for a long time. We need to re-prioritize our fiscal expenditure towards physical and social infrastructure and away from subsidies. We need to define the target groups carefully and move to targeted transfers, preferably direct cash transfers. The necessary governance reforms for such a shift should be a top priority. A system of universal subsidy may promote jobs in the elaborate public distribution system, but that is yet another case of growth-less jobs.

The second is the land issue. India’s geographical area is about 329 million hectares with an average density of 382 people per sq. km. How much land do we need for physical infrastructure and industry? Not much compared with the 329 million hectares. Yet, land acquisition has become a major problem. Governance failure and corruption charges have led to intense distrust among the people, the government and the project developers. Long delays are endemic.

In scale of construction, the Three Gorges Dam in China has been compared to the pyramids of Pharaohs. Starting in 1992, China completed the dam in less than 20 years. In India, with land acquisition problems, the 111km Bangalore-Mysore Infrastructure Corridor, started in 1988, is still incomplete.

The recently enacted Land Acquisition, Rehabilitation and Resettlement Act (LRRA) codifies land acquisition up to the last detail to avoid problems. But, in the process, it may have compounded them. For example, the LRRA prohibits the acquisition of multi-crop irrigated areas, except on a “demonstrable last resort" basis, for industrial projects.

For quality jobs, growth and development, what India needs is accelerated industrial growth. Should industry come up only in deserts, wastelands and infertile areas? Will industry acquire so much land out of the 329 million hectares that food security will be threatened? By prohibiting the acquisition of multi-crop irrigated land for industry, we may preserve a few jobs in agriculture, but in the ultimate analysis, it will be another example of growth-less jobs. The land problem needs to be solved urgently by improving governance and restoring people’s trust in the system.

The third issue is regarding public sector enterprises (PSEs). In the 1950s, the heyday of planning and setting up PSEs, scientist and statistician Prasanta Chandra Mahalanobis believed that by about 1970, with increasing surpluses of the PSEs, no additional taxes would be needed. Initially, the PSEs, by employing engineers and technical professionals, may have fostered an army of middle-class professionals, and also demonstrated to the private sector the can-do principle.

However, even with severe protectionist policies with heavy import restrictions and strict limitations on private sector operations for over three decades, most PSEs failed to display the dynamism for self-sustained growth. Productivity and competitiveness suffered. Instead of generating profits for development, they gobble up high-cost government borrowing. Take for example HMT, a prime public sector watch manufacturer from 1961. For many of us from middle-class backgrounds, the first watch given by our parents that we wore was an HMT. HMT had losses of 242 crore on a revenue of 11 crore in 2012-13.

Take the 32 central PSEs under the department of heavy industry at end-March 2012. With a gross block of 16,639 crore, employing 88,894 people, they generated a net profit of 5,611 crore. Not bad at first sight—a return of 34% on gross block. But on a closer look, the accumulated losses of 23 of these PSEs was 22,976 crore and only nine had accumulated profits to neutralise these losses and yield a net accumulated profit of 2,338 crore! Of the profitable nine, Bharat Heavy Electricals Ltd (Bhel) alone produced an accumulated profit of 24,883 crore! Seventeen of the 32 had negative net worth. Without cogent arguments about the external benefits such as technological diffusion that these 17 generate, they are promoting growth-less jobs.

Of the many items on the reform agenda that need to be addressed for making the next decade vastly transformational, a good starting point is moving away from promoting growth-less jobs.

The author is an economist.

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Published: 22 Oct 2014, 11:36 PM IST
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